Fast Market Research

"India Commercial Banking Report Q4 2012" Now Available at Fast Market Research

Fast Market Research recommends "India Commercial Banking Report Q4 2012" from Business Monitor International, now available

 
Repost This

Boston, MA -- (SBWIRE) -- 09/17/2012 -- BMI View: Liquidity constraints, margin pressure and asset quality concerns are all indicative of a challenging banking sector environment in India over the coming months. Ultimately, despite scope for a gradual recovery in H212 in line with the broader economy, we expect sector profits to disappoint this year and equity market performance to remain muted. We continue to believe that the outlook for Indian commercial banks remains challenging over the coming quarters, despite the potential for a gradual improvement in macro conditions from H212 onwards. From our viewpoint, there are three main factors that are likely to weigh on bottom line performance in the months ahead; liquidity constraints, margin pressure and asset quality concerns. Liquidity constraints: As one might expect, weakness in India's economic growth story has seen demand for new loans cool substantially. Commercial credit growth came in at 15.6% year-on-year (y-oy) in February, marking the slowest pace of expansion since January 2010. What may come as more of a surprise, however, is that India's commercial banks continue to operate in a tight liquidity environment. Indeed, with deposits growing at cyclical lows of 13.4% y-o-y, the banking system's loan-to-deposit ratio currently stands at an all-time high of 78.1%. Given that such tightness usually occurs during times of an expanding (and overheating) economy, the disconnect between liquidity scarcity and economic activity points to a more structural issue afflicting the country's banking sector. To be sure, the Reserve Bank of India (RBI) has been forced to bolster short-term liquidity by increasing the amount of funds available via its repo window. Since the turn of the year, commercial banks have regularly borrowed around 3-4% of their deposit base from the RBI, well above the central bank's comfort zone of 1%. We expect recent cash reserve requirement ratio cuts of 75bps (to 4.75%) and the fall in inflation (which has sent real deposit rates back into positive territory) to help mitigate liquidity concerns. However, with inflation expectations likely to remain elevated, not least due to the government's heavy borrowing schedule, we suspect that banks will continue to operate in a tight liquidity environment.

View Full Report Details and Table of Contents

About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. Representing the world's top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff will help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Financial Services research reports at Fast Market Research

You may also be interested in these related reports:

- United States Commercial Banking Report Q4 2012
- United Arab Emirates Commercial Banking Report Q4 2012
- Venezuela Commercial Banking Report Q4 2012
- Malaysia Commercial Banking Report Q4 2012
- Chile Commercial Banking Report Q4 2012
- South Africa Commercial Banking Report Q4 2012
- Switzerland Commercial Banking Report Q4 2012
- Bulgaria Commercial Banking Report Q4 2012
- Philippines Commercial Banking Report Q4 2012
- Croatia Commercial Banking Report Q4 2012